Calculating Costs Before Setting Up A Business
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There is no certainty that a new business is going to make profits or that it is even going to break even. However, an entrepreneur still needs to calculate costs before setting up a new business.

The financial costs of the new business need to be included in the business proposal. In fact, this is the section of the proposal that a business investor, especially a bank, will be looking at most closely.

An entrepreneur needs to estimate if the new business can break even within a year or two of being in operation. A break-even analysis shows the amount of revenue that an entrepreneur will need to bring in to cover the expenses, before making even a dime of profit.

Many experienced entrepreneurs use the break-even analysis as a primary screening tool for new business ventures. In fact, for most of them the business proposal is not complete till the estimates are completed.

To prepare the financial section of the business proposal, new business owners need to be familiar with basic financial terms as well as the structure of business operations. An entrepreneur needs to be aware of terms such as fixed costs, sales revenue and average gross profit.

An entrepreneur who is able to show a break-even point for the new business shortly after its opening stands a good chance of getting investments for the business. The break-even forecast is a great screening tool that entrepreneurs use to estimate the viability of a new business venture.

Before applying for capital resources for the business, an entrepreneur also needs to analyze the performance of similar products in the market. The entrepreneur then should be able to convince a business investor that there is space for another product in the market and that the product shows promise of making profits.

Business proposals are the most important part of business plans. An entrepreneur needs to be careful while developing the business proposal.

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